Report highlights New Haven as debt-ridden city

A January report jointly released by the Manhattan Institute and the Yankee Institute — two public policy think tanks based in New York and Hartford, respectively — highlighted gloomy economic conditions in poor Connecticut cities, including New Haven. However, city officials are in firm opposition of the report.

Authored by Stephen Eide, a senior fellow at the Manhattan Institute, the 16-page report focused on four major urban centers in the state: New Haven, Hartford, Bridgeport and Waterbury. To illustrate the financial quandaries facing these cities, Eide pointed out that their budgets are “weaker” than before the 2008 economic recession. Each city is seeing its money reserve slowly decrease and its employment opportunities shrink; meanwhile, retirement benefit costs have climbed according to the report’s findings. An increasing poverty rate is another element restraining these cities from getting past their debt struggles.

But multiple city officials took issue with some of the report’s findings. For example, city hall spokesman Laurence Grotheer said New Haven has had a balanced budget in the current fiscal year as well as in the past three years.

Eide said cities such as New Haven tend to rely on economic growth to alleviate the fiscal challenges, a strategy that aims to revitalize downtown, attract outside investment and boost employment levels. Yet, Eide said this tactic has earned “mixed results at best.”

“Growth is important. Let us not forget about growth,” Eide said. “But the best thing to do to ensure your growth in the long term is to reduce your spending.”

In Eide’s report, he proposed slashes to city employees’ pension and health benefits in concurrence with a modest pay raise, citing that pension cost in New Haven increased 93.7 percent between the fiscal year 2006 and the fiscal year 2015. Policy discussions, he said, should shift to whether government employees are paid in the adequate fashion, rather than if they are underpaid.

New Haven Economic Development Administrator Matthew Nemerson SOM ’81, however, criticized the report even further. Characterizing it as a “Harry Potter approach,” Nemerson said he would only be able to implement the report’s recommendations if he were given a magic wand and magical spells. He added that because the city decided to shoulder social and legal obligations to its employees, a drastic political and legal overhaul would be required to change the current pension and benefit system.

“Some people think [social protection] is a right. Some people think it is good fortune. There are different philosophies,” Nemerson said. “But we have legal obligations.”

Grotheer agreed that attributing the city’s high expenditure only to pension and benefits, one among “thousands of expenditures” in city hall’s annual budgeting, would be oversimplifying the process.

Though he stood by his recommendations, Eide said that unions’ collective bargaining process create difficulties in carrying out his suggestions. Two-thirds of Connecticut’s public sector workforce is represented by unions, which would push back on the idea of a smaller benefit package, according to the report. Eide also said it would be more beneficial to taxpayers if local governments chose to decrease benefits rather than cut jobs altogether, especially because cities have curtailed staffing in past years.

“It’s hard to know from a distant perspective, whether or not [New Haven] has too few employees already,” Eide explained. “If they have been reducing staffing for years, I would be careful about reducing more because you come up against the expectation of citizens. People like it when they call 911 or the fire department, they come right away.”

Eide’s concern is shared by Local 3144 President Cherlyn Poindexter, who voiced her opposition to the notion that local governments should cut back on employee benefits and pension plans. Local 3144 is a local union that represents over 460 city employees. Conferring with Eide that New Haven has a “spending problem,” she also pointed out that city municipalities should not blame their employees, especially when Local 3144 members have cooperated in helping New Haven bring down expenditure in the past years.

Poindexter said that her union’s last contract in 2015 was already concessionary, as it agreed to changes in pension plans and less employee benefits, despite the reality of rising medical cost.

New Haven’s current credit rating at Moody’s is Baa1, four levels below the state government’s Aa3 and three downgrades away from junk.